Problem 6-211 [LO8]
Langin Corporation has provided
its contribution format income statement for June.
|
Sales
|
$
|
783,160
|
Variable expenses
|
427,000
|
|
Contribution margin
|
356,160
|
|
Fixed expenses
|
271,360
|
|
Net operating income
|
$
|
84,800
|
Required:
|
|
a.
|
Compute the degree of operating
leverage to two decimal places.
|
Degree of operating
leverage
|
b.
|
Using the degree of operating
leverage, estimate the percentage change in net operating income that should
result from a 15% increase in sales. (Round your
answer to 2 decimal places. Omit the "%" sign in your response.)
|
Percentage change in
net operating income
|
%
|
Explanation:
a.
|
Degree of operating leverage =
Contribution margin/Net operating income = $356,160/$84,800 = 4.20
|
b.
|
Percent increase in net operating
income = Percent increase in sales × Degree of operating leverage = 15% ×
4.20 = 63.00%
|
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